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Master Budget DEBBIE: The Master Budget Is The Primary Financial Planning Mechanism For An

The master budget is the primary financial planning mechanism for an organization that provides the foundation for traditional financial control systems. It is typically presented monthly or quarterly and covers the company's entire fiscal year. The master budget may include an explanatory text discussing the company's strategic direction, how the budget will help achieve goals, and management actions needed. It can also discuss required headcount changes. The master budget has two major parts: the operating budget and the financial budget. The operating budget includes revenues, expenses, a sales budget, production budget, and selling & administrative expenses budgeted over a period of time. A financial budget predicts income and expenses on a long-term and short-term basis to help the business achieve

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Daniela marie Fugata
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59 views3 pages

Master Budget DEBBIE: The Master Budget Is The Primary Financial Planning Mechanism For An

The master budget is the primary financial planning mechanism for an organization that provides the foundation for traditional financial control systems. It is typically presented monthly or quarterly and covers the company's entire fiscal year. The master budget may include an explanatory text discussing the company's strategic direction, how the budget will help achieve goals, and management actions needed. It can also discuss required headcount changes. The master budget has two major parts: the operating budget and the financial budget. The operating budget includes revenues, expenses, a sales budget, production budget, and selling & administrative expenses budgeted over a period of time. A financial budget predicts income and expenses on a long-term and short-term basis to help the business achieve

Uploaded by

Daniela marie Fugata
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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MASTER BUDGET

DEBBIE: The master budget is the primary financial planning mechanism for an
organization and also provides the foundation for a traditional financial control system.
The master budget is typically presented in either a monthly or quarterly format, and
usually covers a company's entire fiscal year. An explanatory text may be included with
the master budget, which explains the company's strategic direction, how the master
budget will assist in accomplishing specific goals, and the management actions needed
to achieve the budget. There may also be a discussion of the headcount changes that
are required to achieve the budget.

DEBBIE: It really hurts furniture company master budget has two major parts including
the operating budget and the financial budget. Our operating budget consists of
revenues and expenses over a period of time which begins with the sales budget the
financial plan, which shows how the resources should be allocated to achieve
forecasted sales. Sales also consists of the production budget which are the direct
materials, direct labor and factory overhead less its ending inventory will result to the
cost of goods sold during the period and we also have a selling & administrative
expenses that will ends with the budgeted income statement during the period.

DANIELA:

A financial budget in budgeting means predicting the income and expenses of the


business on a long-term and short-term basis. Accurate projections of cash flow help
the business achieve its targets in the right way.

The financial budget includes the capital budget represent the major planning device for
new investments. Discounted cash flow techniques such as net present value and the
internal rate of return are used to evaluate potential investments. As well as a cash
budget, and a budgeted balance sheet.
A financial budget is a very powerful tool to achieve the long-term goals of any
business. Importantly, it also keeps the shareholders and other members of the
organization updated about the functioning of the business.

Why Prepare a Financial Budget?

Organizations prepare a financial budget to manage the cash flows in a better way. This
budget gives the business better control and provides a more efficient planning
mechanism to manage the inflows and outflows. Also, The organizations prepares a
financial budget only after planning the different financing activities in the operating
budget.

Different Sections of a Financial Budget

Cash Budget

The cash budget contains information on the inflows and outflows of the business. On
the other hand, the cash flow of the business continues changing and with that, the
cash budget should also change. Making a cash budget is a dynamic process, not a
static one. There must be an immediate reflection of any change in the cash flow in the
cash budget of the business.

Budgeted Balance Sheet

The budgeted balance sheet comprises many other budgets. The major component of
this budget includes the production budget and its associated budgets.

Capital Expenditure Budget

As the name suggests, the capital expenditure budget relates to expenses related to
plant and machinery or any capital asset of the business. This budget determines the
expenses that would be incurred if an existing plant is replaced or any new machinery is
bought. Factors like depreciation, cost of the plant, life of the machinery, etc. are taken
into account when preparing the capital expenditure budget.
Conclusion

The financial budget provides a blueprint for the business to move forward. It addresses
not only the financial aspects of the business, but also checks the operational efficiency.
The extra expenses are cut by emphasizing cost reduction and improving the market
share. In terms of financial budgets, the organization is well prepared to meet the long-
term and short-term expenses.

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